Shinbo Central Association "2 Trillion Won Maturing After September... Strengthening Risk Management of Non-Performing Loans" (Comprehensive)

Press Conference on the 19th Ahead of Loan Maturity Extension End
Total Extension Amount 26.7 Trillion Won...Inevitable Increase in Loss Rate
"Expansion of Special Guarantee System to Overcome COVID-19"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] With just over two months remaining until the expiration of the loan maturity extension for small business owners, the Korea Credit Guarantee Fund Central Association (KCGF Central Association) announced plans to strengthen guarantee risk management. Alongside this, they decided to expand the special guarantee system to overcome COVID-19 and alleviate the management difficulties of small and micro enterprises and small business owners.

On the 19th, the KCGF Central Association and regional credit guarantee foundations held a press conference at the Korea Federation of SMEs in Yeouido, Seoul, where they revealed measures for managing guarantee risks, including countermeasures for non-performing loans expected after the loan maturity extension ends in September.

According to the KCGF Central Association, the total amount of guarantees extended by regional credit guarantee foundations nationwide to ease the financial burden on small business owners is 26.7 trillion KRW. The amount of guarantees maturing in the second half of this year is expected to be 4.1 trillion KRW, of which nearly half, 1.9 trillion KRW, will mature after September.

The KCGF Central Association stated, "Currently, the subrogation payment rate (loss rate) is 1.0%, but it is expected to increase after September." They added, "We will monitor changes in corporate credit risk and subrogation payment rates, classify companies into three groups?normal, potentially recoverable, and unrecoverable?based on repayment capacity, and seek appropriate response strategies."

During the 2008 global financial crisis, the subrogation payment rate surged from 1.3% to 3.0% two to three years later. The KCGF Central Association plans to grant principal and interest repayment deferrals for potentially recoverable companies and provide debt restructuring and rehabilitation support for companies deemed unrecoverable due to long-term delinquency.

Starting from the 18th, the KCGF Central Association raised the guarantee limit and expanded the support targets for the ‘Hope Plus Special Guarantee.’ Small business owners with medium credit scores who receive the Hope Plus Special Guarantee can now obtain an additional 10 million KRW in guaranteed loans. The support target has been expanded from recipients of quarantine support funds to recipients of loss compensation funds, and low-credit small business owners who have received Hope Loans from the Small Enterprise and Market Service can also receive an additional special guarantee with a limit of 10 million KRW.

Lee Sang-hoon, Chairman of the KCGF Central Association, said, "We hope that the improvement of the special guarantee system will alleviate the financing difficulties of small and micro enterprises and small business owners affected by the prolonged COVID-19 pandemic and help stabilize their management."

Additionally, to provide a second chance for small and micro enterprises and small business owners who wish to restart after closure, a ‘Re-startup Special Guarantee’ worth 1 trillion KRW will be implemented from the end of this month. Utilizing 80 billion KRW reflected in this year’s second supplementary budget, support will be provided with a limit of 50 million KRW and a 100% guarantee ratio.

Next year, regional credit guarantee foundations will build their own applications to expand the non-face-to-face guarantee system. The process, which previously took several days from guarantee consultation to document submission and contract signing, will be shortened to within 10 to 15 minutes. They will also attempt to develop new statistics using data held by regional credit guarantee foundations. By examining changes in sales and employee numbers after guarantee support, they will evaluate policy effectiveness and explore ways to investigate and analyze the management status of companies using regional credit guarantees for the first time.

Meanwhile, the KCGF Central Association explained, "During the COVID-19 period, as a specialized guarantee institution for small business owners, the guarantee balance nearly doubled from 23 trillion KRW before COVID-19 to 45.5 trillion KRW as of June." They added, "This year, we plan to maintain the expansion trend by increasing the guarantee scale to 49.4 trillion KRW." They also announced that new guarantee supply in the first half of this year reached 17.4 trillion KRW, achieving 67.4% of this year’s target.

This content was produced with the assistance of AI translation services.